t #.

UNITED STATES DISTRICT COURTDISTRICT OF MASSACHUSETTS

Plaintiff ,

TERRY SWACK, Individually and onBehalf of all Others Similarly Situated ,

vs.

CREDIT SUISSE FIRST BOSTON,ELLIOT ROGERS and MARKWOLFENBERGER,

Defendants .

No_ 02 -CV-11943 DPW

JURY TRIAL DEMANDE D

CONSOLIDATED AMENDED CLASS ACTION COMPLAINT

Plaintiff, through herattomeys, alleges the following upon information and belief, excep t

as to the allegations which pertain to the Plaintiff and Plaintiff' s counsel, which are alleged

upon personal knowledge- Plaintiff's information and belief are based, inter alia, on the

investigation made by and through Plaintiff's attorneys .

NATURE OF ACTIO N

1 . This is a federal securities class action which is brought by Plaintiff agains t

Defendants Credit Suisse First Boston ("CSFB") and certain of its research analysts, o n

behalf of all person or entities who purchased the common stock of Razorfish, Inc .

("Razorfish") during the period from June 14,1999 through May4, 2001 (the "Class Period" )

Plaintiff seeks to recover damages caused to the Class by Defendants' violations of Sectio n

10(b) of the Securities Exchange Act of 1934 (the "Exchange Act") and Rule 1Ob-5

promulgated thereunder, and Section 20(a) of the Exchange Act .

2 . This action arises as a result of the issuance by Defendants of positive analyst

reports recommending that investors purchase Razorfish stock . When issuing those reports ,

Defendants failed to disclose significant, material conflicts of interest which they had, wit h

respect to links between such positive recommendations and CSFB's obtaining and retaining

investment banking business from Razorfish . Defendants also failed to disclose that CSFB

allowed analysts to discuss a proposed rating with Company executives prior to publishing

a rating, which caused undue pressure on analysts to initiate or maintain positive researc h

coverage and compromised analyst independence-

3. As a result of Defendants' misconduct, alleged herein, Plaintiff and the Clas s

members have suffered substantial damages .

JURISDICTION AND VENU E

4 . This Court has jurisdiction of this action pursuant to Section 27 of the Exchange

Act [15 U .S.C. §78aa], and 28 U .S.C. §§1331 and 1337.

5. This action arises under and pursuant to Section 10(b) of the Exchange Ac t

[15 U.S .C . 78j(b)], Rule 1 Oh-5 promulgated thereunder bythe SEC [17 C_F . R_ §240 .1 Ob-5]

and Section 20(a) of the Exchange Act [15 U . .C . . 78t(a)] .

6. Venue is proper in this District pursuant to Section 27 of the Exchange Act an d

28 U .S .C . §1391(b) . Many of the acts complained of herein occurred in substantial part in thi s

District .

7_ In connection with the acts alleged in this Complaint, Defendants, directly o r

indirectly, used the means and instrumentalities of interstate commerce , including , but not

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limited to, the mails, interstate telephonic communications and the facilities of the NASDA Q

National Market System, a national securities exchange .

PARTIES

8 . Plaintiff Terry Swack purchased shares of Razorfish stock during the Clas s

Period, as set forth in the certification attached to the original Complaint filed in this action ,

and was damaged thereby. Plaintiff is a resident of the Commonwealth of Massachuse tts .

9 . Defendant CSFB is a leading global financial services company headquartere d

in Zurich, Switzerland which has offices located in Boston, Massachusetts .

10. Defendant Elliot Rogers ("Rogers") was a research analyst and head o f

technology research at CSFB during the Class Period .

11 . Defendant Mark Wolfenberger ("Wolfenberger") was a research analyst a t

CSFB during the Class Period .

12. Defendants Rogers and Wolfenberger are sometimes referred to herei n

collectively as the " Individual Defendants . "

PLAINTIFF'S CLASS ACTION ALLEGATION S

13. Plaintiff brings this action as a class action pursuant to Federal Rule of Civi l

Procedure 23(a) and (b)(3) on behalf of a Class consisting of all persons or entities who

purchased shares of Razorfish during the Class Period and who were damaged thereby .

Excluded from the Class are Defendants ; members of the Individual Defendants' immediate

families, any director, officer, parent, subsidiary, oraffiliateofC FB ;anyentityinwhichany

excluded person has a controlling interest ; and their legal representatives, heirs, successors

and assigns.

14. The members of the Class are so numerous that joinder of all members i s

impracticable . While the exact numberof Class members is unknown to Plaintiff at this tim e

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and can only be ascertained through appropriated iscovery, Plaintiff believes that there are

thousands of members of the Class located throughout the United States . Throughout the

Class Period, shares of the common stock of Razorfish were actively traded in an efficient

market on the NASDAQ National Market System . Record owners and other members of the

Class may be identified from records maintained by Razorfish and/or its transfer agents and

may be notified of the pendency of this action by mail and publication, using forms of notice

similar to those customarily used in securities class actions .

15 . Plaintiff's claims are typical of the claims of other members of the Class as all

members of the Class were similarly affected by Defendants' wrongful conduct in violation of

federal law that is complained of herein .

16 . Plaintiff will fairly and adequately protect the interests of the members of the

Class and have retained counsel competent and experienced in class and securities litigation .

17 . Common questions of law and fact exist as to all members of the Class an d

predominate over any questions solely affecting individual members of the Class . Among the

questions of law and fact common to the Class are .

(a) Whether the federal securities laws were violated by Defendants' acts

and omissions as alleged herein ;

(b) Whether defendants participated in and pursued the illegal course of

conduct complained of herein ;

(c) Whether statements disseminated to the investing public during the

Class Period made misrepresentations or omissions of material

information as alleged herein ;

(d) Whether the market price of the common stock of Razorfish was

artificially inflated due to the material misrepresentations and omissions

complained of herein ;

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(e) To what extent the members of the Class have sustained damages and

the proper measure of damages-

18 . A class action is superiorto all other available methods forthe fair and efficient

adjudication of this controversy since joinder of all members is impracticable . As the

damages suffered by individual Class members may be relatively small, the expense and

burden of individual litigations make it impossible for members of the Class individually to

seek redress forthe wrongs done to them. There will be no difficulty in the management of this

suit as a class action .

SUBSTANTIVE ALLEGATION S

Backgroun d

19. Defendant CSFB claims to be a leading global financial services company

which serves global institutional, corporate, government and individual clients . Its businesses

include securities underwriting, sales and trading, financial advisory services, investment

research, venture capital and brokerage services for financial institutions .

20, Razorfish, Inc . ("Razorfish") describes itself as a strategic digita l

communications company that provides digital Change Management (sm) strategy, design,

and technology services to leading companies and organizations around the world . In general

terms, Razorfish was a so-called "new economy" company that provided internet related

services to businesses. The company is headquartered in New York, New York and has

offices in Boston, Massachusetts and elsewhere . Razorfish is not a defendant in this action.

21 . As part of an ongoing multi-state investigation, Massachusetts state securities

regulators began investigating whether analysts' reports at CSFB had been tainted by the

firm's desire to win investment banking business. On September 12, 2002, Reuters News

Service reported that the investigation by Massachusetts securities regulators had uncovered

e-mails showing that CSFB analysts felt pressured to recommend stocks to please potentia l

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investment-banking clients, and that there were links between analysts issuing positive

recommendations and their receiving compensation from CSFB's investment banking

division . The Reuters article states :

An exchange of CSFB e-mails indicates that CSFB analysts mayroutinely have received compensation that was linked to specificinvestment banking transactions- The e-mail exchange, whichwas provided by sources close to securities regulators, alsosuggests that a C FB analyst may have publicly recommendeda company whose prospects he privately doubted .

Indeed, the e-mails contain language - such as areference to a stock as a "piece of crap" - that is reminiscent ofthe now-famous Merrill a-mails unveiled in April [2002] by NewYork State Attorney General Eliot Spitzer.

22 . In the September 12 article, Reuters reported that in the CSFB e-mails,

Defendant Rogers, who held a supervisory position in CSFB's research department, asked

an analyst, Kevin McCarthy, whether he had been "paid for helping it out" on the August 2000

initial public offering by Lantronix, Inc . ("Lantronix"), a networking technology supplier . The

Lantronix IPO was managed by Donaldson, Lufkin & Jenrette ("DLJ"), which C FB had

acquired in the fall of 2000 . According to Reuters, Rogers stated in the e-mails that if

McCarthy was paid, he might'"have a moral obligation to maintain some form of backburner

coverage." Rogers went on to state that if McCarthy's investment banking division

compensation "did not reflect this puppy, I will support you in pushing back on coverage ."

McCarthy replied in an e-mail that he "agreed to do the deal" because DLJ had no networking

analyst and that he "would do stuff beyond the call of duty ." McCarthy went on to state "`I put

my reputation on the line to sell this piece of crap calling favors from very important

clients . . . . This deal was an embarrassment to me and the firm and I wasted a lot of bullets

to get it done ." (Emphasis added) .

23 . On September 19, 2002, Bloomberg Online reported that McCarthy stated in

an e-mail that while he was at DLJ, "he felt pressured to be upbeat about Lantronix even afte r

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its Aug . 4, 2000, initial public offering fizzled . The shares fell 20 percent that day, to $8 from

the $10 offering price . On Aug . 30, McCarthy rated the shares a'buy' and issued a 12-month

forecast of $17 a share . [DLJ] bankers prevented him from getting information about the

company, McCarthy wrote . "

24. In addition, on September 19, 2002, USA Today reported that a-mail s

uncovered by Massachusetts investigators suggested that recommendations of other

companies ' stock by other SFB research analysts, including the Individual Defendants, were

similarly tainted byC FB'sdesiretoattractinvestmentbankingcustomers . The UAToday

a rticle stated in relevant pa rt :

Internet analysts at Credit Suisse First Boston called it the"Agilent Two-Step" - that's when they would rate a stock a "buy"while secretly telling large investors theirtrue opinion, accordingto e-mails uncovered by Massachusetts securities regulators .

The e-mails, regulators say, are just the latest sign thatstock research at CSFB was tainted by its need to attractinvestment-banking business .

"The discoveries keep coming , and they keep gettingmore and more amazing ," says William Galvin, Secretary ofState for Massachusetts and the chief securities regulator.

Investigators in Massachusetts appearto be finding manyof the same practices that New York authorities found at MerrillLynch, which in May agreed to pay $100 million to settle chargesthat its analysts recommended stocks they didn't really believein . Massachuse tts investigators have found CSFB e-mails thatdescribe how :

Analysts felt pressure to positively rate investment-banking clients .

The firm gave executives who hired C FB forinvestment banking access to initial publicoffering .

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Frank Quattrone, C FB's star Internet investmentbanker, tried to keep control of the stock researchteam .

However, the latest e-mails, written in October2000, areparticularly alarming to regulators because they were sentdirectly to Elliot Rogers, head of technology research for CSFB .

In one e-mail, analyst Bhevin Shah said he was facingsome "tough decisions" on rating Chartered Semiconductor(CHRT) and United Microelectronics (UMC), two companiesCSFB helped take public . Shah said he wanted to give UMC a"neutral" rating but was "wondering how to approach this basedon banking sensitivities . "

Analyst Tim Mahon responded to Shah and Rogers,"Suggest you ask Elliot about the `Agilent Two-Step .' That'swherein writing you have a buy rating (like we do on CHRT, andthank God its not a Strong Buy) but verbally everyone knows yourposition ." Rogers, an analyst when CSFB tookAgilent public in1999 at $30 a share, initiated coverage with a 'buy ." Agilentshares rose at first, then fell steadily to $14 .75 Wednesday.

25. On September 13, 2002, the New York Post reported that another CSF B

analyst sent an e-mail to defendant Rogers complaining about defendant Wolfenberger' s

stock research practices . The New York Post article stated in relevant part :

One damaging e-mail obtained by the Postfrom an anonymoussource is dated March 21, 2001, from Gilbert George, a CSFBtech analyst . He wrote to Elliot Rogers, head of CSFB equityresearch, describing the actions of top tech services analystMark Wolfenberger .

The e-mail suggests that Wolfenberger pushed initialpublic offerings of companies "that never should have gonepublic" and that he did so despite "structural problems" because`"we all got our bonuses for a good year . "

Wolfenberger now covers such tech services firms suchas Razorfish, Inc ., Viant Corp . and iGate Corp ., according toBloomberg data, some of which were taken public by CSFB .

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26. On September 20, 2002, the New York Post reported that Massachusetts

Secretary of State William Galvin had, in a letterfrom Galvin's office, asked New York State

Attorney General Spitzer to consider filing criminal charges against C FB over the firm's

fraudulent research coverage. The New York Post article reported thatthe letter, written by

Deputy Secretary of State Matthew Nestor, stated that "This office now has a good faith basis

to believe that certain actions might include the violation of criminal statutes . . . _" The article

stated that the damaging evidence was found in more than 80,000 CSFB e-mails reviewed

as part of Calvin's investigation in analysts' conflicts of interest at CSFB .

27 . Based upon the results of its investigation, on October 21, 2002, the

Enforcement Section of the Massachusetts Securities Division (the "Securities Division") filed

an Administrative Complaint (the "Massachusetts Complaint") against Defendant CSFB

alleging that

contrary to the role of an independent research analyst, which is to makeobjective and informed judgments about companies based on publicly availableinformation, the research analysts in the Global Technology Group ("TechGroup") at CSFB worked forand were controlled by investment banking Thisreporting structure and complete control resulted in investment banking exertingundue influence on the research analysts to give favorable ratings to companiesfor which CSFB hd done or hoped to do investment banking work. Analystsdisseminated biased, subjective, and compromised research favorable toCSFB investment banking clients, which resulted in the Tech Group producingmillions of dollars in investment banking fees for CSFB . CSFB purposelymisled investors by disseminating into the marketplace fraudulentmisstatements of fact concerning the companies covered by the analysts.Moreover, CSFB failed to disclose any of the analysts' conflicts ofinterest to investors . When CSFB feared information concerning how itsanalysts were required to bowto investment banking clients, CSFB intentionallyset outto destroy documentation, which could reveal this to the investing public.

(Emphasis added .)

CSFB's Tech Group

28 . When Frank Quattrone joined CSFB in mid-1998, he was already an

established star in high tech investment banking . Just two years earlier, he had left Morga n

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Stanley & Co. ("Morgan Stanley"), where he had begun his career, for deutsche Bank

Securities ("Deutsche Bank") in a highly publicized move that reportedly involved a pay

package of unprecedented proportions. Quattrone was joined thereby numerous colleagues

and associates from Morgan Stanley .

29 . At Deutsche Bank, Quattrone developed what amounted to an autonomous

"firm-with in-a-firm," a structure that gave him substantial control over not only the investment

bankers working with him, but also technology sector research analysts and a group of

brokers formed to provide services to individuals associated with his investment banking

clients . Quattrone structured his operation so that the heads of corporate finance, mergers

and acquisitions, and research all reported to him . He also established Deutsche Bank Tech

PCS to provide brokerage services to executives and directors of his investment banking

clients and had the head of that group report to him as well .

30 . Two years after Quattrone left Morgan Stanley for Deutsche Bank, he was

successfully recruited to join CSFB . At CSFB, Quattrone served as Managing Director of the

Tech Group and, in November 2001, became a member of CSFB's Executive Board . At

Quattrone's suggestion, most ofthe Deutsche Bank Technology Group followed him to CSFB,

thereby enabling him to recreate, largely intact, the anomalous structure he had developed at

Deutsche Bank .

31 . When he agreed to join CSFB, Quattrone insisted on essentially replicating

the firm-within-a-firm structure . In setting up the CSFB Tech Group, Quattrone surrounded

himself with dozens of former colleagues from deutsche Bank and Morgan Stanley and

created a structure underwhich not just investment bankers butalso research analysts and

sales personnel all reported to him, and all devoted their efforts to securing for him an ever

greater share of investment banking business .

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32. The Tech Group at CSFB was organized into four departments: Corporate

Finance, Mergers and Acquisitions, Research, and Private Client Services (Tech PCS) . All

four departments were headed by the same individuals who had headed those functions for

Quattrone at Deutsche Bank and all the department heads reported directly to Quattrone . The

heads of research and Tech PCS also had nominal "dotted line" reporting obligations to

department directors in C FB"s Equities Division, but in practice the secondary managers

had little influence on the operations of the Tech Group .

33 . I n negotiating the terms of his move to CSFB, Quattrone sought and obtained

the exclusive right to provide financial, advisory, and investment banking services to

technology clients ; revenue attribution forservices provided by other C FB units to technology

clients; responsibilityfor managementof the Tech Group's research analysts ; and authority

to make assignments to the Tech Group's research analysts and decide their compensation .

Quattrone's authority over the analysts in the Tech Group was a departure from existing

arrangements at CSFB underwhich no research analysts were supervised by or had reporting

obligations to anyone in investment banking .

CSFB 's Investment Bankers Controlled the Tech Group's Research

34_ The Massachusetts Complaint alleges that CSFB's investment bankers, under

Quattrone 's direction , controlled the Tech Group 's research . To demonstrate Quattrone's

control over both investment banking personnel and research analysts, the Massachusetts

Complaint refers to a le tter prepared for Quattrone 's signature by Michael Kwatinetz,

Managing Director of Tech Research and Co-Head of Technology Research, which clearly

indicates that "everyone in the Tech Group is under [Quattrone's] control . "

35 . The Massachusetts Complaint alleges that the investment banking division's

control over research analysts was also clear to the analysts, based on the responses t o

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interrogatories filed with the Securities Division, in which "many analysts stated that Quattrone

and investment bankers had the ability (to] hire and fire them . "

36. The Massachusetts Complaint further alleges that "the influence of investment

banking on analysts is shown by the fact that investment banking personnel reviewed the

research analysts" and also "assessed which research analysts should be promoted and

receive higher compensation ." According to the complaint :

This compensation more often than not was give to "team players" by way oflucrative bonuses . Investment banking's abiiityto control the compensation wasmade clear repeatedly by all of the Tech Group . For example, in a New Year'se-mail to CSFB Tech Research Officers, Quattrone stated, "your trustymanagement team is meeting . , , to determine compensation for the group . "

37_ In addition, the Massachusetts Complaint alleges that this reporting structure

was also apparent to potential investment banking client's of CSFB, although not to the

investing public . The Massachusetts Complaint attaches an excerpt from an analyst's

evaluation, in which a non-CSFB employee stated, "I hope he continues his exceptional value-

added and objective research ; without becoming compromised by CSFB's banking

relationships, like so many other CSFB analysts have become ." The Massachusetts

Complaint goes on to allege, that, although it may have been apparent to potential banking

clients of CSFB, "the average investorwas unaware of this structure and the conflicts resulting

therefore ."

CSFB's Investment Bankers Allowed Its

Investment Banking Clients to Control Researc h

38. The Massachusetts Complaint also alleges that the Tech Group's investment

banking group allowed CSFB's clients to control research . It alleges that Quattrone instructed

analysts "to call company management regarding initial coverage or a change in the rating of

a company stock." The complaint alleges that when one analyst downgraded a stock withou t

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contacting the company first, Quattrone, who was clearly aggravated, called the analyst and

said "that is not how we do business around here . "

39_ I n addition, the Massachusetts Complaint alleges that company executives and

potential investment banking clients of CSFB knew that if they were unhappywith a rating, they

could call Quattrone or other investment bankers at CSFB and that the investment bankers

"would pass onto the analyst that company management was unimpressed with a rating or

language used ." The complaint further alleges that "[i]nvestment bankers pressured the

analyst to give a more favorable rating and to `sugarcoat' the language to appease the

potential clients to continue to generate huge investment banking fees ." The complaint also

alleges that the analysts, for their par t

understood thattheywere to change their unfavorable language ortheir rating .Analysts were pressured not to downgrade a stock orto talk negatively abouta company. In fact, a call from company management accompanied by thethreat of taking business somewhere other than CSFB, could be and was attimes, enough to get an analyst terminated .

40, By way of example, the Massachusetts Complaint alleges that one analyst had

discussions regarding his initiation of coverage with the manager of a company, for whose

IPO C FB had recently been lead manager . According to the complaint:

The analysttold the company managerthat he was going to initiate with a "buy"rating , because the stock price had soared once trading began . Within hoursof that conversation , the analyst received a call from John Hodge, Head of U .S .Corporate Finance , a branch of investment banking . Hodge told the analyst thathe had received a call from the CEO of the covered company . The CEO toldHodge that he was upset because the analyst was not positively inclined towardthe stock .

41 . The Massachusetts Complaint goes on to allege that this was not the first oronly

time this analyst had been pressured by CSFB's investment bankers to appease CSFB's

investment banking clients . According to the complaint :

This analyst who had been repeatedly chastised by investment banking for notbeing "banking friendly," was afraid of yet another "slap on [his] hand . . . and soto play the safe road [he] wentwith a strong buy against [his] better inclination . "

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The analyst, after further discussing the situation with Hodge, felt pressured torate the stock with a "strong buy," rather than face the consequences of actingagainst investment bankers' interest . This time, instead of the reprimands andretribution, he had experienced in the past, for making this change, the analystreceived praise from investment banking and was told that he did a "good jobon the [company] initiation ."

42. By contrast, when that analyst refused to go along with the wishes of CSFB's

investment bankers and investment banking clients, he was punished by CSFB . The

Massachusetts Complaint alleges tha t

Based on a downgrade of a particular stock, CSFB precluded this analyst fromcoverage of a semiconductor space that he had been promised . CSFB gavethis prime coverage area to an analyst with less experience- Furthermore,based on his unwillingness to be banking friendly, he never received thebonuses that he was promised .

43. The Massachusetts Complaint alleges that, because the Tech Group's

investment bankers were allowed to pressure analysts to change their ratings to please

CSFB's investment banking clients and potential clients , "an overwhelming majority of the

stocks covered by the Tech Group remained at `buy' or `strong buy' and a downgrade from

`hold' to `sell' was extremely rare . "

CSFB's Investment Bankers Pressured Company Managers

To Pay for Positive Research Coverag e

44 . The Massachusetts Complaint alleges that C FB's investment bankers also

controlled company managers and that "[w]hen it appeared that CSFB was losing a deal to

anotherfirm, Quattrone, or his staff, would threaten company managers that CSFB would drop

coverage of a stock, unless CSFB was awarded a certain position in an upcoming banking

deal ."

45. The Massachusetts Complaint also alleges that SFB pressured companies

to pay for positive research coverage. As an example, the complaint alleges that CSFB

threatened to discontinue coverage of one company in orderto pressure the companyto pay

fees it owed to CSFB . According to the complaint, Chris Legg of CSFB afterward sent a n

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email to Quattrone and other high-ranking CSFB personnel, stating that "now that the fee

issue is behind us, I would ask that we return them to 'most favored nation' status . "

CSFB's Unwritten Rules Required Analysts to Provide

Positive Research Coverage for Its Investment Banking Clients

46 . The Massachusetts Complaint alleges that the investment bankers in CSFB's

Tech Groups imposed the following unwritten rules on research analysts : "Rule number one,

'if you can't say something positive, [about a company], don't say anything at all' ; and Rule

number two, `why couldn't you just go with the flow of the otheranalysts, ratherthan tryto be

a contrarian ."' (Emphasis in original .) According to the complaint, analysts were required to

follow these rules in orderto appease corporate clients and ultimately keep their jobs ." The

complaint further alleges that "analysts were required to satisfy company executives and

expand CSFB's potential for new business, by placing fraudulent misstatement into the

marketplace . Analysts knew that these rules hindered their ability to be effective, but they

were forced to play by them to be thought of as a 'team player' and thereby receive a bonus

and ultimately to keep their jobs . "

47. The Massachusetts Complaint alleges thatthese rules were well known within

CSFB, and Defendant Rogers in particular, but were hidden from the public . According to the

complaint :

This was clearly demonstrated, by what occurred when one research analystmemorialized these unwritten rules in writing . On or about May 30, 2001, thisanalyst forwarded the unwritten rules to his supervisor, Elliot Rogers . After, thee-mail was sent to various people within CSFB, an investment bankercontacted this analyst . The banker warned him, "you caused a stir . . . the shit'shitting the fan ." He was told "the memo had upset a lot of people, probablywasnot a good idea ." . . . . Thereafter, the analyst was summoned to a meeting atthe bequest [sic] of Quattrone to the office of the CSFB General Counsel . TheGeneral Counsel was concerned that these rules would find their way intopublic. Rather than inform the public of the fraud being perpetrated in themarketplace, The General Counsel told the analyst to delete all copies of the e-mail because he would hate to see this appear in the [Wall Street] Journal .

48. The Massachusetts Complaint also contains this scathing conclusion regarding

the conflicts of interest created by the Tech Group's investment banking practices :

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A sophisticated review of the Tech Group's dealings shows that CSFB touted"independent research" and instead used its research to market its investmentbanking business . . . . This was hidden from the public, who relied on theresearch information . Thus, CSFB perpetrated fraud by the disseminatedmaterial misstatements of facts into the marketplace . (Emphasis added . )

Research Analysts Were CompensatedBased on Their Contribution to Investment Banking Deals

49. Based upon its independent investigation of CSFB's investment banking

activities, on April 28, 2003, the SEC filed a complaint (the "SEC Complaint") against CSFB

in the United States District Court for the Southern District of New York alleging violations of

the federal securities laws as well as NASD and NYSE rules . In addition to the allegations set

forth in the Massachusetts Complaint, the SEC Complaint alleges that from 1 998 through

December2001, CSFB used its research analysts to "solicit and conduct" investment banking

business with potential investment banking clients . The SEC Complaint further alleges that

"[b]y providing incentives for equity research analysts to assist in the generation of investment

banking revnues, CSFB created and fostered an environment with conflicts of interest that, in

some circumstances, undermined the independence of research analysts and affected the

objectivity of the reports they issued . "

50. According to the SEC Complaint, investment banking business was a major

source of revenue and influence at CSFB . Driven in large part by the Tech Group, in 1998

CSFB's investment banking revenue increased from approximately $1 .47 billion to

approximately $1 .7 billion, a 21 percent increase . In 1999, CSFB's investment banking

revenue increased another 22 percent to approximately $2.318 billion . In addition, due in

large part to the efforts of the Tech Group, in 1999 CSFB managed more domestic I POs than

any other investment banking firm . In 2000, CSFB's investment banking revenue increased

dramatically to approximately 3 .681 billion, a 59 percent increase over the previous year .

51 . The SEC Complaint also alleges thatfrom July 1998 th rough December 2001,

the Tech Group's research analysts were compensated based, in large part, on thei r

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contribution to CSFB's investment banking deals . Indeed, according to the complaint, "fflhe

vast majority of equity research analysts' compensation was derived from the bonus received

rather than the base salary. At CSFB it was not uncommon for a more senior level Technology

Group research analyst to have a salary of $100,000-$250,000, and also receive a bonus of

$5,000,000-$10,000,000 or higher . "

52 . According to the SEC Complaint, the Tech Group's bonus pool was funded ,

inter alia, by technology-related investment banking revenue as well as a percentage of

revenue generated by secondary sales and trading in technology stocks . The complaint

alleges that CSFB's head of technology research used the revenue generated with respect

to each company covered by an analyst as a "starting point" to base his recommendation for

that analyst's bonus . Quattrone and the heads of the Tech Group's mergers and acquisitions

and corporate finance departments would then make the final decision regarding each

analyst's compensation .

CSFB 's Analysts Played a Key Role at Investment Banking "Pitches"And At Times Implicitly Promised Favorable Research To Help CSFB

Obtain Investment Banking Deals From Potential Clients

53. The SEC Complaint also alleges that between July 1998 and December 200'1,

CSFB's Tech Group analysts played a "key role" in helping CSFB to obtain investment

banking deals from potential clients . According to the SEC Complaint :

Once CSFB's technology bankers - with the assistance of the technologyresearch analysts -determined that a companywas a strong candidate for anoffering, a technology research analysts assisted in C FB's sales "pitch"to thecompany, in which CSFB would explain why it should be chosen as the leadmanaging underwriter for the offering . Quattrone described the relationshipbetween the technology research analysts and investment bankers as follows :"[I]n many of the things that we did with our clients, both groups [TechnologyBanking and Technology Research] were involved . And the clients experiencedCSFB, and in some sense both bankers and analysts worked together in acollaborative fashion to deliver service to a client . "

54 . The SEC Complaint alleges that, as part of the sales pitch, research analysts

prepared "selling points " regarding CSFB's research that were included in the pitch book s

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presented to the potential investment banking client . Analysts also "routinely appeared with

investment bankers at the pitches to help sell CSFB to the potential client ." Indeed, according

to the SEC Complaint, CSFB's Director of Research for the Tech Group described the

research analyst as the "star of the show" at the sales pitch to the company .

55. The SEC Complaint further alleges that : "CSFB pitch books to potential clients

included representations about the role that the technology research analyst would play if

CSFB obtained the business . The analyst's written and oral presentations, and the presence

of a research analyst atthe pitch, strongly implied and at times implicitly promised that CSFB

would provide positive research if awarded the investment banking business . "

56 . As an example, the SEC Complaint alleges that CSFB's pitch book fo r

Numerical Technologies included a'diiscussion regarding research coverage headlined' Easy

Decision . . . Strong Buy,' implicitly promising that CSFB would issue a'strong buy' rating

upon initiation of coverage ." As another example, the SEC Complaint alleged that in a Fall

1999 pitch to another company, "C FB's pitch book stated that the particular CSFB

technology research analystwho would coverthe company `[g]ets it,' would 'pound the table'

forthe company, and would be the company's'strongest advocate"' and would participate in

pre-marketing one-on-one meetings [with potential investors] prior to launch ."'

57 . According to the SEC Complaint, the pitch book described the role of research

by providing a "roadmap" forthe amount and type of coverage that analysts would issue during

the first year after initiating coverage, including research issued at least once a month and

"inclusion of the company's stock as a 'focus stock ."' The pitch book also stated that CSFB

analysts would provide the following : "[s]ignificant'front-end' effort to position the company's

story in a prospectus and at road shows" ; a "[s]ales force'teach-in' to begin communicating

the [company's] opportunity to investors"; "active involvement on roadshow ; "[d]irect follow-up

with key investors after one-on-one meetings"; and "standalone" research reports concerning

the company .

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5$_ The SEC Complaint that in a pitch book presented to a company,

CSFB highlighted the fact that it maintained a higher post-IPO trading volume for companies

whose IPOs it led than any other investment banker . In addition, the complaint notes that

"CSFB highlighted that its research analysts maintained a'strong buy' rating even though the

company announced results below estimates," and distinguished itself from other deal

managers who reduced their ratings based upon that financial information . According to the

complaint, "SFB implied through this pitch book that the firm would maintain positive

research for companies that entered into investment banking deals with C FB . "

Defendants Issued Misleading Research Analyst ReportsConcerning Razorfish In Order To Obtain Investment Banking Busines s

59 . CSFB was the Lead Managerforthe initial public offering of Razorfish common

stock on or about April 27, 1999 in which Razorfish sold over $55 million of stock. CSFB

received a fee of over $3 million for managing Razorfish's IPO . Within two days, Razorfish's

stock price jumped from a split adjusted price' of $70 per share in the IPO to an intra-day high

of $114 per share on April 29, 1999, before settling back down into the $70-80 per share

range where it stayed for the next few weeks .

60. CSFB initiated coverage of Razorfish at least as early as June 14,1999, when

it issued a report authored by Defendant Woifenbergerthat rated Razorfish a "buy ." At that

time, Razorfish was trading at a split adjusted stock price of approximately 58 per share .

61 . CSFB issued reports on Razorfish, authored by Defendant Wolfenberger, on

June 25, July 16 and July 21, 1999, which reiterated the "buy" rating . During that period,

Razorfish's split adjusted stock price gradually increased to almost $80 per share on July 21,

1999 .

' On January 12, 2000, Razorfish announced a 2-for-1 stock split that became effective onJanuary 27, 2000 .

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62 . In October 1999, CSFB assisted Razorfish in the acquisition of another

company. On November3,1999, a C FB report authored by Defendant Wolfenberger raised

the rating on Razorfish to "strong buy" and raised the 12-month split adjusted stock price

target to $250 per share . Razorfish was at that time trading at a split adjusted price of

$156.50 per share; thus, the $250 price target represented a projected 60% price increase

in Razorfish shares within a 12 month period .

63_ In late 1999 and January, 2000, Razorfish was contemplating a secondary

public offering of its common stock . On information and belief, C FB was in discussions with

Razorfish about being a manager or lead manager of the secondary offering .

64 . Defendants' "strong buy" recommendation was reiterated in C FB reports ,

authored by Defendant Wolfenberger, on December 2, 1999, and January 12, February 16,

March 3, April 26, and May 2G, 2000, notwithstanding sharp declines in the price of Razorfish

stock beginning in January 2000 . Even while the price of Razorfish was declining,

Wolfenberger's reports had price targets projecting substantial appreciation in the price of

Razorfish stock. For example, in his February 16, 2000 report, Wolfenberger set a price

target of $75, reflecting a projected appreciation of 45%, notwithstanding the price of

Razorfish shares had declined to approximately $52 . In his March 3, 2000 report,

Wolfenberger maintained his "strong buy" recommendation and his price target of $75,

notwithstanding that the price of Razorfish stock had declined to approximately $36 .

Wolfenberger's continued "strong buy" rating and $75 target price in the face of Razorfish's

steadily eroding stock price is entirely consistent with CSFB's sales pitch to potential

investment banking clients highlighting that CSFB's analysts would maintain positive research

for companies that entered into investment banking deals with CSFB .

65. C FB's ratings and target prices entered the marketplace and were reported

in various financial news media . For example, on August 30, 2000, the Dow Jones Business

News reported that C FB's Wolfenberger was maintaining his "strong buy" rating fo r

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Razorfish while lowering ratings on other companies in the technology sector . Subsequently,

on September 6 2000, the Dow Jones News Service reported that while other analysts were

reducing their ratings on Razorfish, "Credit Suisse First Boston analyst Mark Wolfenberger

recommended [that] clients aggressively buy Razorfish because' perception (was) creating

an excellent opportunity ."' On October 6, 2000, CNNfn, a cable television financial news

network, reported that CSFB was maintaining a "strong buy" rating on Razorfish, despite

reducing its earnings estimates for 2001 and 2002 .

66. CSFB's favorable research had a positive impact on Razorfish's stock price .

For example, on March 3, 2000, CNNfn reported that Razortish's stock price "skyrocket[ed]"

up 11 percent after CSFB increased its revenue estimates .

67. Despite Defendants' positive research and ratings, Razorfish's stock price

declined steadily in 2000. Nevertheless, Defendants continued to rate Razorfish a "strong buy"

at least as late as October 2000 . Ina report authored by defendant Wolfenbergeron October

6, 2000, CSFB rated Razorfish a "strong buy" and had a price target of $15 per share, even

though CSFB had cut its earning projections for 2001 and 2002_ This price target was 70%

above the then trading price of $8 .75 per share . Maintaining a "strong buy" rating despite the

fact that C FB had cut its earnings estimates was entirely consistent with its sales pitch to

potential investment banking clients in which CSFB highlighted thefactthat, unlike otherdeal

managers who reduced their ratings upon such financial information, CSFB's analysts

maintained a "strong buy" rating even though the company announced results below

estimates .

68 . In reports authored by defendant Wolfenberger on October 27, November 30,

December 13, 2000 and February 9, 2001, CSFB continue to recommend Razorfish as a

"buy" with target prices substantially above the ten current market prices for Razorfish stock .

Defendants' issuance of research analyst reports with "buy" ratings and target prices

substantially higherthan those at other firms is entirely consistent with CSFB's sales pitch t o

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potential investment banking clients promising that CSFB "stands by its clients" and would

offer better stock ratings than rival bankers .

69 . On October 7, 2002, the Boston Globe reported that CSFB "promised to

provide high-tech companies positive ratings - even in the event of bad news . . . .°" The

October 7 article cited a July 1999 pitch book which promised that CSFB "stands by its

clients ." The Boston Globe also reported that the pitch book "indicated with stock charts and

data points that it would offer better stock ratings than rival bankers , including Goldman, Sachs

& Co. and Morgan Stanley Dean Witter ." In the article, Massachusetts Secretary of State

Galvin stated : "These documents have the firm boasting that they would not give bad ratings,

even if others did . . . . "

70. It was not until May 4, 2001, when Razorfish shares were trading atjust 1 .14

per share, that CSFB finally reduced its rating of Razorfish from "buy" to "hold ."

Defendants CSFB ' s Tech Group Allowed Research Analysts To DiscussProposed Ratings With Company Executives Prior to Publishing Ratings,

Causing Undue Pressure on Analysts To Initiate or Maintain Positive Researc hCoverage and at Times Compromised Analyst Independence

71 . The SEC Complaint also alleges that Defendant CSFB's Tech Group "allowe d

its research analysts to provide executives of companies for which they were about to issue

research with copies of analyses and proposed ratings of their reports for editorial comment

prior to dissemination ." The SEC alleged that analysts did so in part "in an attempt to

maintain good standing with the company ." As alleged in the SEC Complaint, "this type of

direct interaction between analysts and issuers put additional pressure on the equity research

analysts and at times compromised the independence of the research analysts . "

72 . As an example, the SEC Complaint cites the following interaction between

Defendant Wolfenberger and the CEO of Razorlish in October 1999 . In October 1999, CSFB

assisted Razorfish in acquiring a company called I-Cube Inc . ("I-Cube") . The SEC Complaint

alleges that on October29,1999, while the I-Cube acquisition was still pending, a Tech Group

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research analyst sent an email to the Razorfish CEO concerning CSFB 's re-initiation of

coverage for Razorfish . In his email, that unnamed analyst states :

With icube about to close, we need to think about resuming coverage of thefish . I want your opinion on rating . We would have taken you to a strong buybut given the recent stock run, does it make sense for us to keep theupgrade in our back pocket in case we need it? Either way I don't care .You guys deserve it, I just don't want to waste it .

(Emphasis added .)

73 . The SEC Complaint further alleges that the Razorfish CEO responded to th e

analyst as follows : 1 think we should re -initiate with a buy and a higher price target and keep

the upgrade for a little while . . . . Although its [sic] getting hard to justify the valuations . "

74. The SEC Complaint goes on to allege that:

In this case, the research analyst re-initiated coverage on November 3, 1999with a strong buy rating when the stock was trading at $34 . He reiterated andmaintained that strong buy from January 12, 2000, when the stock was tradingat $39 a share, until October 27, 2000, when he finally lowered his rating to abuy rating when the stock was trading at $4 . The research analyst maintainedthat buy rating until May 4, 2001, when Razorfish was trading at just $1 .14. Atthat time, he once again downgraded to a hold rating .

75. As noted above , Defendant Wolfenberger was the research analyst wh o

prepared CFB's November 3, 1999, and each of the CSFB research analyst reports

concerning Razorfish issued from January 12, 2000 until October27, 2000 and setthe rating s

and target prices contained therein .

76. None of the reports issued by Defendants concerning Razor fish during the Clas s

Period disclosed, and the investing public was unaware of, significant, material conflicts of

interest which they had, with respect to links between such positive recommendations an d

FB'sobtaining and retaining investment banking business from Razorfish, including, but

not limited to : (i) that CSFB's investment Bankers controlled the Tech Group's research, (ii)

that CSFB's investment bankers allowed its investment banking clients to control research ;

(iii) that C FB's investment bankers pressured company managers to pay for positiv e

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research coverage; (iv) that CSFB's "unwritten" rules required analysts to provide positive

research coverage for its investment banking clients ; (v) that research analysts were

compensated based on their contribution to CSFB's investment banking deals ; (vi) that

CSFB's analysts played a key role at investment banking "pitches and implicitly promised

favorable research to help CSFB obtain investment banking deals from potential clients ; (vii)

that Defendants issued misleading research analyst reports concerning Razorfish in orderto

obtain investment banking business ; and (viii) that CSFB's practice of allowing research

analysts to discuss a proposed rating with company executives in advance of publishing a

rating caused undue pressure on analysts to initiate or maintain positive research coverage

and compromised analyst coverage .

COUNT I

AGAINST ALL DEFENDANTS FOR VIOLATIONS

OF SECTION 10(b) OF THE EXCHANGE AC T

AND RULE 1 0b-5 PROMULGATED THEREUNDE R

77 . Plaintiff repeats and realleges each and every allegation set forth above .

78 . During the Class Period, Defendants, and each of them, carried out a plan ,

scheme and course of conduct thatwas intended to and did : (i) deceive the investing public,

including Plaintiff and other Class members, as alleged herein ; (ii) artificially inflate and

maintain the market price of the common stock of technology companies that were covered

by D FB's stock research team ; and (iii) cause Plaintiff and other members of the Class to

purchase those companies ' stock at artificially inflated prices . In furtherance of this unlawful

scheme, plan, and course of conduct, Defendants, and each of them, took the actions set forth

herein .

79 . These Defendants : (a) employed devices, schemes and artifices to defraud ; (b)

made untrue statements of material fact and/or omitted to state material facts necessary to

make the statements not misleading ; and (c) engaged in acts, practices and a course o f

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business which operated as a fraud and deceit upon the purchasers of Razorlish common

stock in violation of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated

thereunder .

80. Defendants' material misrepresentations and/or omissions were done

knowingly or recklessly and for the purpose and effect of obtaining lucrative investment

banking business from Razorfish . Defendants recommended that investors buy Razorfish

stock without disclosing a serious conflict of interest between Defendants' reports and the

acquisition of investment-banking business by CSFB ; and they failed to disclose that such

positive recommendations were linked to CSFB's desire to obtain and keep Razorfish as an

investment-banking customer .

81 . As a result of the dissemination of the materially false and misleading

information and failure to disclose material facts, as set forth above, the market price of the

common stock of Razorfish was artificially inflated during the Class Period . In ignorance of

the fact that the market price of Razorfish shares was artificially inflated, and relying directly

or indirectly on the false and misleading statements made by Defendants, or upon the integrity

of the market, and/or on the absence of material adverse information that was known to or

recklessly disregarded by Defendants but not disclosed in public statements by Defendants

during the Class Period, Plaintiff and the other members of the Class acquired Razorfish

common stock during the Class Period at artificially inflated prices and were damaged

thereby.

82 . At the time of said misrepresentations and omissions, Plaintiff and the other

members of the Class were ignorant of their falsity, and believed them to be true . Had Plaintiff

and the other members of the Class known of the omitted material facts, Plaintiff and the other

members of the Class would not have purchased or otherwise acquired Razorfish common

stock during the Class Period, or, if they had acquired such stock during the Class Period,

they would not have done so at the artificially inflated prices which they paid .

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83 . Plaintiff and the members of the Class were injured because the risks that

materialized were risks of which they were unaware as a result of Defendants'

misrepresentations , omissions and other fraudulent conduct alleged herein . Absent

Defendants' wrongful conduct, Plaintiff and the members of the Class would not have been

injured .

84. By virtue of the foregoing, Defendants each violated Section 10(b) of the

Exchange Act and Rule 1 Ob-5 promulgated thereunder.

85. As a direct and proximate resultof Defendants' wrongful conduct, Plaintiff and

the other members of the Class suffered damages in connection with their purchases of

Razorfish common stock during the Class Period .

COUNT I I

AGAINST DEFENDANT CREDIT SUISSE FIRST BOSTON AND

ROGERS PURSUANT TO SECTION 20(a) OF THE EXCHANGE AC T

86 . Plaintiff repeats and realleges each and every allegation set forth above .

87 . This claim is asserted against defendants CSFB and Rogers pursuant to

Section 20(a) of the Exchange Act, 15 U .S .C . §78t(a) .

88 . During the entire Class Period, defendant CSFB was a "controlling person" of

the Individual Defendants, within the meaning of Section 20(a) of the Exchange Act .

89 . Defendant CSFB was a "controlling person" of the Individual Defendant s

because it had the influence and power over the Individual Defendants to cause, and it did

cause, the Individual Defendants to engage in the wrongful conduct complained of herein, and

because it had the power to have prevented the Individual Defendants from engaging in the

unlawful conduct alleged herein, but it purposely and intentionally did not use that powerto do

so .

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90. Defendant Rogers was a "controlling person" of defendant Wolfenberger as h e

was the head of technology research at FB and defendant Wolfenberger reported to him ,

directly or indirectly.

91 . As setforth above in Count I, the Individual Defendants violated Section 1 0(b)

of the Exchange Act and Rule 10b-5 promulgated thereunder by their acts and omissions as

alleged in this Complaint . By virtue of their status as a "controlling person" of the Individual

Defendants , CSFB and Rogers are liable , to the same extent as are the Individual

Defendants, forthe Individual Defendants' violations of Section 10(b) of the Exchange Act and

Rule 1 Ob-5 promulgated thereunder , pursuant to Section 20(a) of the Exchange Act .

PRAYERS FOR RELIE F

WHEREFORE, Plaintiff, on behalf of herself and the Class, prays for judgment a s

follows:

A_ declaring this action to be a plaintiff class action properly maintained pursuan t

to Rule 23(a) and (b)(3) of the Federal Rules of Civil Procedure ;

B . finding that the Defendants violated Section 10(b)ofthe Exchange Act and Rul e

lOb-5 promulgated thereunder by their acts and omissions as alleged in this Complaint ;

C. awarding Plaintiff and the members of the Class damages, together wit h

interest thereon ;

D. awarding Plaintiff and other members of the Class theircosts and expenses of

this litigation, including reasonable attorneys' fees and experts' fees and other costs an d

disbursements ; and

E . awarding Plaintiff and other members of the Class such other and further relie f

as may be just and proper under the circumstances .

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JURY TRIAL DEMAN D

Plaintiff demands a trial by jury .

By her attorneys ,

Thomas G h . ' , BBO # 4680Edward F . Haber, BO # 5620Theodore M_ Hess-Mahan , BBO #557109Shapiro Haber & Urmy LL P

75 State StreetBoston , MA 02108(617) 439-393 9

Dated : June 3, 2003

1 HEREBY CF lFY 11W A COPY OFTHE ABOV EDOCUMENT WAS IqKANEY O

737W5FOR EACH O FA I1tqWW*WCN

THEODORE U. HES MAHA N

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